Budget Brief 2021-22

Squaring the circle

Given the present state of the economy due to the shocks caused by the COVID-19 pandemic, a significant increase in direct and indirect taxation was expected. Instead, all direct taxes have been spared, while heavier indirect taxes will fall   on alcohol and cigarette consumers. While meant to finance the Consolidated Fund, the increased tax on petrol can also be taken as an intended boost for running electric cars, in a bid to reduce imports of fossil fuel. This is indeed a very laudable initiative, coupled with the proposal to intensify the use of solar energy.

Public works constitute a major part of the budget proposals. Indeed, the first ten minutes or so of the budget speech were devoted to a long enumeration of those projects, no doubt to the pleasure and satisfaction of those concerned in those localities.  It goes without saying that the timely execution of those public works will require effective management.  In this context, it is refreshing to note that the Minister expects that a resilient public service will play the game, the more so since the publication of the PRB report is forthcoming. 

The setting up of a Project Implementation and Monitoring Agency is welcome, to monitor, oversee, coordinate and assist in the implementation of budgetary measures, projects, and programmes including those under the Covid-19 Project Development Fund. It is noted with interest that the Agency will report on progress on a monthly basis to a Coordination Committee under the chairmanship of the Prime Minister; also, that the High-Level Committee on private sector investment projects will meet on a monthly basis under the chairmanship of the Prime Minister.  This working together of the public authorities and the business sector should bear fruits for the progress of the economy.

The transformation and modernisation of industries have also retained the attention of the Minister.  A Rs5 billion Modernisation and Transformation Fund will be set up and managed by a new Industrial Financial Institution.  One can only wish that such funds do transform the industrial park in Mauritius, so as to enable the manufacturing entities to increase their overall productivity, and hence their competitiveness, so that they can capture a share on the new markets in Africa, China and India, with which we have recently signed commercial agreements.

The second objective of the budget is to set up a new economic architecture for the country.  The Economic Development Board will be at the forefront of this programme.  There are interesting proposals concerning the financial services sector, non-sugar agricultural production, the pharmaceutical industry and biotechnology.  Emphasis is placed on research and innovation, and it is good to note that this is intended to apply to both the public and private sectors. Also to be expected: a new Bank of Mauritius Act, a new Banking Act, a FinTech Innovation Lab, and a training programme for those involved in the control of money laundering practices and terrorism financing.

The absence of any reference to the development of the maritime resources of Mauritius is regrettable. Nor is there any mention of our demographic shortfall, except that this problem surreptitiously creeps in with the proposal to increase the number of international students-an excellent idea per se, but coupled with the objective of granting them a work permit for twenty hours remunerated work per week.

Nor has any consideration been given to the effect of all the public works programme on the trade balance which is running a large deficit. Such works   have a bearing on the imports of raw materials.

The third and last major objective targeted by the Minister is the renewal of confidence amongst all the strata of the population. This is a clever way of introducing –as is the case every year-the long list of budget expenditures for each and every ministry.  This enumeration of budget credits is usually accompanied by hand clapping in the audience. All told, total budgeted expenditure is set at 32.5% of GDP (Gross Domestic Product), whereas revenue is budgeted at 27.5 % of GDP. The resulting deficit of 5 % compares with one of 5.6% expected by June 30, 2021.  In spite of those estimates, the public debt is expected to decrease from 95% of GDP in June 2021 to 91% in June 2022.

Time will tell whether the circle will be squared.

Pierre Dinan

Guest Writer



BDO (Mauritius) Team is grateful to Mr. Pierre Dinan, former Partner of BDO/DCDM, for his editorial and valued contribution.

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